Question
Please make sure you are answering the question according to the blanks given. Otherwise, dont answer it. Entity A is a toy manufacturer in Hong
Please make sure you are answering the question according to the blanks given. Otherwise, dont answer it.
Entity A is a toy manufacturer in Hong Kong which commenced its business more than thirty years.
On 1 January 2017, Entity A bought a $2,000,000 5.00% bond for $1,900,000. It also incurred an issue cost of $50,000. Entity A paid the bond price by a direct bank transfer on 1 January 2017. The issue cost was settled on 31 January 2017. Fixed interest is received in arrears. The bond will be redeemed at a premium of $119,201 over its face value on 31 December 2019. Entity A may sell the bond if the bond price is attractive or for any other reason determined by the board of directors. The fair value option was not elected at the initial recognition.
The fair values of the bond were as follows:
- 31 December 2017 $2,200,000
- 31 December 2018 $2,080,000
- 31 May 2019 $2,250,000
- 30 June 2019 $2,350,000
- 31 December 2019 $2,500,000
Due to the cash shortage, Entity A did not prefer to hold the bond until maturity. On 31 May 2019, the board of directors decided to sell the bond to an independent third party for $2,400,000 and will sign the contract on 30 June 2019. However, the bond buyer did not appear to sign the contract on 30 June 2019. Finally, Entity A held the bond until maturity.
The effective interest rate is 8.00%. The market environment is stable and credit risk-free. The end of the reporting period is 31 December.
REQUIRED:
According to relevant accounting standards, prepare journal entries to recognise the transactions of Entity A from 1 January 2017 to 31 December 2019.
ACCOUNTS FOR INPUT:
| Financial asset (Amortised Cost) | Financial asset (FVTPL) | Financial asset (FVTOCI) |
| Financial liability | Equity instrument | Transaction cost | Bank | Loss allowance | Impairment loss |
| Gain on remeasurement (P/L) | Loss on remeasurement (P/L) | Gain on remeasurement (OCI) | Loss on remeasurement (OCI) |
| Payable | Receivable | Other income | Other expense | Reclassification (P/L) | Reclassification (OCI) |
| Interest expense | Interest revenue | Loss on disposal | Gain on disposal | Retained earnings | No entry |
ANSWERS:
Journal Entries:
Date | Account Name | Debit ($) | Credit ($) | Hints For Sequence |
1-Jan-17 | - | |||
Not an Asset. Judge Dr/Cr. Only Enter Amount. | ||||
Judge Dr/Cr. Only Enter Amount. | ||||
- | ||||
31-Jan-17 | - | |||
- | ||||
31-Dec-17 | - | |||
Judge Dr/Cr. Only Enter Amount. | ||||
- | ||||
31-Dec-17 | - | |||
- | ||||
31-Dec-18 | - | |||
Judge Dr/Cr. Only Enter Amount. | ||||
- | ||||
31-Dec-18 | - | |||
- | ||||
31-May-19 | - | |||
- | ||||
30-Jun-19 | - | |||
- | ||||
31-Dec-19 | - | |||
Judge Dr/Cr. Only Enter Amount. | ||||
- | ||||
31-Dec-19 | - | |||
- | ||||
31-Dec-19 | - | |||
Judge Dr/Cr. Only Enter Amount. | ||||
- | ||||
31-Dec-19 | - | |||
Judge Dr/Cr. Only Enter Amount. | ||||
- |
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